Is real-time credit card processing right for you?

We are often asked what is involved with the online acceptance of credit cards. Basically, you have two choices: to sign up for a "real-time" merchant account (meaning that credit cards are processed automatically as part of the online order process), or to process the cards offline in a manual fashion. Either way, to get started you will need a SSL-enabled Web hosting account and a shopping cart software application to allow the orders to be placed. (For more on these, please see our July 2000 issue of Virtualtech News)

Once you have your shopping cart software set up, the next question you need to ask yourself is "How am I going to process these credit cards?" Before you can answer that question, you need to look at your individual situation.

Obviously, a major factor is cost. Most online merchant account providers will charge you a hefty yearly fee, plus a per-transaction charge based on a percentage of the sale amount. It is not uncommon to have to plunk down upwards of $500 just to get started using a real-time account. You will need to take a look at what your projected sales are going to be and weigh the benefits of having the convenience of real-time processing. If you are going to gross $2000 to $3000 a year in sales, is it really worth paying out $1000 for this convenience?

If you have an existing retail store and already accept credit cards, processing your credit card transactions manually offline is definitely worth considering. This would be very similar to accepting an order over the phone. Your customer places an order through your Web site, you retrieve the order information (including credit card information) from the site using a secure connection, and then process the card using the same onsite terminal that you would use for a retail customer in your store. In this way, you do not have to set up anything special on your site other than a way to place orders. More importantly, there is no additional charge to you.

If you are selling an intangible, such as access to a portion of your Web site or a software download that will be "delivered" immediately, then you may need to look more closely at using a real-time processor. Again, keep the cost of this in mind and weigh it against the amount of sales that you realistically expect to achieve before opening a merchant account.

An important thing to consider: If you are selling "hard goods" (items that will need to be shipped) you should be aware that most, if not all, of the major credit card companies will not allow you to actually charge the cardholder’s account until the order is actually shipped. So, even if you do have a real-time credit card processing system in place, you will still have to log into your system at the time of shipment to mark the order as fulfilled and actually charge the account. This lessens the convenience of having the real-time processing in place.